Why is the LUT in GST a Game-changer for Exporters?
India records an all-time high in Exports of goods and services, which have crossed $820 Billion in FY 2024-25, which was about a 6% rise compared to 2023-24. That’s an astounding share- and yet a wide array of exporters land into capital locking due to unnecessary taxes. That’s when LUT in GST (Letter of Undertaking) pitches in as a powerful solution.
Now, you don’t need to pay taxes on every export for refunds any more; LUT facilitates registered exporters to ship without paying taxes. It not only frees working capital but also ensures efficient cash flow.
Letter of Undertaking in GST isn’t just a taxation need but a tactical move towards the financial proficiency of your export business. This article will walk you through what LUT means in GST, eligibility criteria, process, and more. Let’s scroll down below!
Top Players in Indian Exports in USD!
What is LUT in GST: A Quick Snapshot!
LUT full form in GST is a Letter of Undertaking, which means a legal declaration submitted by the exporters under the GST regime to ship goods and services without paying taxes. It regulates compliance while facilitating global suppliers to claim tax exemptions on supplies. LUT in GST should be renewed every year as it stays legitimate only for a year.
We have understood what is LUT in GST; let’s move ahead to understand the rules that govern this declaration under CGST.
96A Under CGST: How It Governs Letter of Undertaking?
Introduced in the year 2017, rule 96A under CGST facilitates permitted global suppliers to export goods or services without the need to pay IGST. Those who are ineligible can sign a bond that gives bank assurance rather than using LUT in GST. Failing to abide by the Letter of Undertaking rules can result in exporters paying penalties and the termination of tax relief, emphasizing its importance in staying compliant.
You can effortlessly track and manage your LUT bonds with the dedicated LUT feature in Munim.
Who Files LUT: The Eligibility Criteria!
GST LUT eligibility applies to exporters of goods and services as well as businesses dealing with them. Let’s get a clear breakdown.
Exporters
- Registered taxpayers who supply Indian goods and services globally or to special economic zones are enticed to file a letter of undertaking.
- It implies to exporters who wish to ship products or services without having to pay IGST (Integrated Goods and Services Tax)
Industries With Zero GST Defaults
- The person applying for LUT in GST shouldn’t be listed under the tax defaulters, i.e. he/she should have zero GST complaints against them.
- Businesses who haven’t paid taxes for about ₹250 lakh or more are not eligible.
- This sets a criterion that businesses that have clean compliance records are only eligible to file a letter of undertaking.
Now that we have seen the eligibility criteria to submit a letter of undertaking, it’s time to scroll down and have a look at the documents needed.
Which Documents Do You Need to File LUT?
- Letter of Undertaking Cover Letter: It’s an appealing letter that is signed by the official.
- Eligibility Criteria: You must meet all the criteria to be eligible for LUT in GST.
- Proof that you are registered to GST: Submit the documents that prove you are a registered taxpayer.
- PAN Card: Submit your PAN details as your identification proof.
- KYC Details: Share ID and postal proof accredited entity.
- GST RFD 11 Form: It is crucial to file LUT.
- IEC Code Copy: If global supplies are included.
- Cancelled Cheque: Share a copy of the cancelled cheque that reflects all the bank details.
How to File LUT in GST: A Complete Break-down of Every Step!
The below section entices a step-by-step process on how to get a LUT certificate. Take a quick look at it!
Login to the GST Portal
- Navigate to the official GST site and get authorized access with your credentials.
Letter of Undertaking Filing Zone
- Go to dashboard
- Navigate to services > User service > Choose Furnishing of LUT
Choose the Financial Year
- Select the fiscal year from the drop-down for Letter of Undertaking.
- LUT in GST is to be renewed every year as it remains valid only for a year.
Enter Details into the LUT Form
- Enter GSTIN name, business address, contact number, declaration form based on 96A under CGST, and details of witnesses.
Submit Requested Documents
- Submit a self-declaration form that highlights there are no GST defaults against you.
- Share documents like PAN cards, compliance statements, etc.
Submit the Letter of Undertaking
- Cross-check the information added in the LUT form thoroughly.
- Add digital signature through DSC or e-signature.
Acknowledgement
- Once you have applied, the official will verify all the details.
- Once approved, you will receive an acknowledgement message. Now, you can get a Letter of Undertaking from the portal, and LUT stays valid for a year.
Let’s Wrap Up!
In this rapidly changing international trade scenario, LUT in GST is not just a tax requirement; it’s a planned financial move for exporters. It eradicates the tax burden and ensures efficient cash flow. Doesn’t matter if you are a giant in the industry or a newbie, start renewing your letter of undertaking to avoid taxes that weigh your business down.
The above blog not only enlightens you with its definition rules but also takes you through how to apply for LUT in GST. Read the blog, and if you have any other queries, shoot them below, and we will answer them. Save the blog and stay tuned until we publish another one.
FAQs on LUT in GST!
1. What is LUT number in GST?
The unique reference code generated after submitting the Letter of undertaking on the GSTN portal is LUT number in GST.
2. What is the purpose of LUT in GST?
It facilitates exporters to supply goods and services globally without having to pay IGST.
3. Is it mandatory to mention LUT number in GST on invoice?
LUT number in GST should be specified on your invoice to avail the benefits of the letter of undertaking.
4. How to check LUT in GST Validity?
- Navigate to the GST portal and log in with your ID and PIN
- Navigate to services > User Services > View My Submitted LUTs
- Here, you will get the status of LUTs if it’s submitted, accepted, rejected, or expired.
